India's Modi eyes Silicon Valley on U.S. trip as euphoria fades

NEW DELHI (Reuters) - Tech titans will court Indian Prime Minister Narendra Modi in Silicon Valley this weekend, but away from the glitz, the euphoria of his first trip to the United States a year ago has faded as promised deals stall and key reforms flounder.

A firm believer in the new economy and power of social media, Modi will be welcomed by Apple, Facebook and Google, who want to grow in a market where the world's third-largest internet user base is set to multiply in coming years.

Apple CEO Tim Cook is due to drop by Modi's hotel in San Jose, before the Indian leader joins Mark Zuckerberg for a "townhall" session broadcast live from Facebook headquarters.

He will be able to relive some of the glory of 2014's rock star-like Madison Square Garden rally in New York when he addresses 17,000 Indian expatriates at San Jose's "Shark Tank" sports arena on Sunday.

Modi's standing in the United States rose further when U.S. President Barack Obama visited India in January and the two tightened defense and civil nuclear cooperation with a promise of billions of dollars of business.

The relationship is still evolving, with the world's two biggest democracies agreeing on Tuesday to jointly train peacekeepers in Africa, a step in a growing military alignment partly aimed at balancing China's expansion.

But in other areas, progress has been slow.

Western businesses and diplomats in Delhi privately say Modi's reputation as a man of action has been hurt by setbacks on economic reform. Some carp that he is better at speeches and launching projects than seeing them through.

The Thomson Reuters/INSEAD Q3 Asian Business Sentiment Survey found on Wednesday that optimism among Indian companies, while still high, had been dented by the slow pace of reform.

U.S. lawmakers wrote to the Obama administration on Monday complaining about barriers to trade they said had got worse under Modi, as well as disputes over copyrights and patents.

"The sheen is off, certainly. He is no longer the new kid on the block," said Neelam Deo, a former Indian diplomat in Washington now at Gateway House, a think-tank.

"The first trip was euphoric, this one is much more a consolidation phase of the relationship."

CHOPPER RED TAPE

On Tuesday, India's cabinet approved a $2.5 billion purchase of 37 Apache and Chinook helicopters from Boeing, giving Modi something concrete for when he meets Obama on Monday.

But the clearance came more than a year after the deal was agreed by the defense ministry, highlighting the lack of funds due to a slower-than-expected pick-up in India's economy and the bureaucratic morass that plagues ties between the countries.

"We have formidable bureaucracies on both sides," with residual mistrust from the Cold War, said Lalit Mansingh, a former Indian ambassador to Washington, referring to India's previous strong ties with the Soviet Union.

"Things are bound to be slow."

While the clearance has been given, India and Boeing must still sign a commercial contract.

GE Chairman Jeff Immelt this week said India's nuclear accident liability law was not in line with global standards and his company would not be investing, a blow for hopes that an insurance pool announced by Modi and Obama in January would break an impasse over a historic 2007 civil-nuclear deal.

India had worked around the liability law "to the extent possible," a top government source said in response.

HOUR IN THE SUN

On the Sept. 24-29 trip, Modi's mind will be focused more on solar power than nuclear; he has an ambitious target to build 100 GW of solar capacity in seven years.

On Saturday he visits Tesla Motor's Elon Musk to learn about battery technology that could help harness the power of the sun. He will also attend a renewable energy talk at Stanford.

On the first trip by an Indian prime minister to Silicon Valley, Modi hopes to attract funds and skills from U.S. innovators to help India's burgeoning start-up scene grow, and he will seek to encourage some Indians who have thrived around San Jose to bring their knowledge back home.

"He'll be building a bridge," said Rajat Tandon, who heads a program focused on startups at Indian IT group NASSCOM and was among the dozens of Indian entrepreneurs flying to California to join Modi this week.

For GE, which helped start India's IT revolution 30 years ago with an early commitment to outsourcing, the future in India is less about startups and more about Modi's flagship "Make In India" program, Immelt said, but only time will tell if it works.

"The most interesting thing in India today is on how big a manufacturing place can it be; to me that is the unanswered question - whether or not it can really compete," he told Reuters.

Additional reporting by Clara Ferreira Marques and Tommy Wilkes in Mumbai and David Brunnstrom in Washington; Editing by Mike Collett-White